Following the recent developments in Libya, the UN, EU and UK have adopted further measures relating to the asset freeze imposed in March 2011 (details of which are contained in our previous e-bulletin).
On 16 September 2011, the UN Security Council adopted Resolution 2009 (2011) (the "UN Resolution") which, among other things, partially lifted the arms embargo imposed on Libya and the asset freeze targeting some entities, as described below.
On 28 September 2011, the EU adopted EU Regulation 965/2011 (the "Regulation") which amends its previous Regulation 204/2011 to reflect the UN Resolution. The Regulation entered into force on 29 September 2011. The UK's Libya (Asset-Freezing) Regulations 2011 have also been amended in line with the UN amendments to the asset freeze.
Modified asset freeze
The EU Regulation modifies the asset freeze in respect of:
- the Central Bank of Libya;
- the Libyan Arab Foreign Bank;
- the Libyan Investment Authority; and
- the Libyan Africa Investment Portfolio (together, the "Unfrozen Entities"),
so that only funds, other financial assets and economic resources belonging to, owned, held or controlled, directly or indirectly by the Unfrozen Entities as of 16 September 2011, that were held outside Libya on that date, remain frozen.
Although the Unfrozen Entities remain on the designated persons list, the list has been amended to reflect the above modification to the asset freeze and to confirm that there is no prohibition on a prospective basis on making funds or economic resources available, directly or indirectly, to or for the benefit of, the Unfrozen Entities.
Any funds, other financial assets and economic resources belonging to, owned, held or controlled, directly or indirectly, by the Unfrozen Entities which are received or generated after 16 September 2011 are therefore not subject to the asset freeze. There is no prohibition on conducting new transactions with the Unfrozen Entities. Funds not subject to the asset freeze can be used as directed by the Unfrozen Entities, including to meet obligations that arose before 16 September 2011.
An HM Treasury Financial Sanctions Notice (dated 29 September 2011) confirms that interest or other earnings on the frozen funds of the Unfrozen Entities will not be frozen as from 16 September 2011, but any appreciation in value of frozen assets will remain frozen. For example, where one of the Unfrozen Entities holds units in an investment fund, if dividends are accumulated within the fund, increasing the value of the units, then the units themselves remain frozen. However future income distributions on the units (reflecting dividends etc) will not be frozen.
The asset freeze remains in force in relation to all other designated persons and entities. The current list of designated entities is available here.
The EU Regulation also allows Member States (under certain conditions) to issue licences permitting dealings in frozen funds. In respect of assets of the Unfrozen Entities which remain frozen (i.e. those received pre 16 September 2011), the amendments to the EU Regulation contain an expanded list of permitted licensing purposes. These include:
- humanitarian needs;
- fuel, electricity and water for strictly civilian uses;
- resuming Libyan production and sale of hydrocarbons;
- establishing, operating or strengthening institutions of civilian government and civilian public infrastructure; or
- facilitating the resumption of banking sector operations, including to support or facilitate international trade with Libya.
The existing grounds for authorising a release of frozen funds will also continue to apply to any frozen funds held by the Unfrozen Entities and any existing licences issued by HM Treasury in respect of the Unfrozen Entities remain valid.
A number of additional hurdles apply before the new grounds can be relied on (e.g. that the Member State providing the licence has liaised with the Libyan authorities in relation to the proposed use of the funds).
In accordance with the UN Resolution, the EU Regulation also relaxes the existing arms embargo, providing that Member States may, for security or disarmament assistance to the Libyan authorities, authorise the provision to persons, entities or bodies in Libya of technical assistance, financing and financial assistance related to the goods and technology listed in the EU's Common Military List (provided that such authorisation is notified to the UN Sanctions Committee and it has not objected).
The US has also relaxed its sanctions imposed on Libya by issuing a new General Licence authorising, subject to certain conditions, from 19 September 2011, transactions with the Government of Libya, its agencies, instrumentalities, and controlled entities and the Central Bank of Libya. An asset freeze remains in force in respect of a number of persons and entities linked to the Gaddafi regime and, save as otherwise licensed, funds which were blocked as at 19 September 2011, under Executive Order 13566 or the Libyan Sanctions Regulations, remain blocked.
Copies of the relevant legislation can be accessed here.